South faces defining moment on “development-friendly” WTO reforms

The WTO reform agenda is becoming a battleground for competing visions and proposals advanced by member states.

by D. Ravi Kanth

GENEVA: The developing countries are facing a defining moment for pursuing “development-friendly reforms” at the World Trade Organization, with the Doha Development Agenda (DDA) negotiations having almost been killed by the United States and other developed countries with the tacit support of the WTO secretariat, trade envoys told the South-North Development Monitor (SUNS).

Significantly, the European Union, which had hitherto remained as a counterweight to the US at the WTO, appears to have abdicated its role and joined forces with the US on WTO reforms, said a trade envoy who asked not to be quoted.

The EU and other developed countries are almost reconciled to the prospect of the WTO Appellate Body (AB) becoming dysfunctional due to the US blocking the selection process for filling the vacancies at the AB. (If the vacancies remain unfilled, the AB will cease to function after 11 December when it will be reduced to one member.)

Yet the EU and other developed countries have lined up behind the US in calling for sweeping “reforms” at the WTO concerning transparency and notifications, the trade envoy said.

Other key countries like Brazil also appear to have decided that it would be beneficial to support the US instead of antagonizing it, said a South American trade envoy who asked not to be quoted.

Brazil, which had created the G20 developing-country coalition to bring about reforms in global farm trade, is now one of the frontrunners in pushing the informal plurilateral initiatives to draw up rules on electronic commerce and investment facilitation, among other issues.

Given the near-unanimity among the US and its allies on WTO reforms, other developing countries must join forces to safeguard the core multilateral principles embodied in the WTO’s foundational Marrakesh Agreement, the trade envoy suggested.

A number of important issues under the proposed reforms – such as transparency and notification requirements, and graduation/differentiation among developing countries in availing of special and differential flexibilities – will test the resolve of developing countries in the face of concerted attempts by the US and other developed countries to bring about rifts and fragmentation among the developing countries, the trade envoy argued.

Proposals on transparency

and notification

On 8 July, the WTO’s Council for Trade in Goods (CTG) will discuss two proposals on transparency and notification requirements.

The US and its allies on 27 June circulated a revised proposal on “procedures to enhance transparency and strengthen notification requirements under WTO agreements”, which envisages naming and shaming provisions and financial penalties for non-compliance.

As a counter to the US-led proposal, seven developing countries – South Africa, India, Cuba, Tunisia, Nigeria, Uganda and Zimbabwe – circulated their own proposal on 27 June centring on “an inclusive approach to transparency and notification requirements in the WTO”.

In the revised proposal by the US, the EU, Japan, Canada, Australia, New Zealand, Argentina, Costa Rica and Chinese Taipei, the proponents made some cosmetic changes in the language on counter-notifications and administrative measures.

New language has been inserted “to encourage Members, at any time, to bring to the attention of the relevant [WTO] Committee information they consider has not been notified by another Member in accordance with the Agreements and Understandings listed in paragraph 1 [which relates to WTO Agreements on agriculture, anti-dumping, subsidies and countervailing measures, safeguards and state trading, among others].”

The US has previously tabled counter-notifications against India’s notifications on rice, wheat and cotton, among others, based on data provided by its powerful farm lobbies.

The US and its allies propose financial penalties and naming and shaming if a WTO member fails to submit timely notifications. The naming and shaming administrative measures include designating the member as a member with notification delay, and calling upon the representatives of the member at WTO formal meetings only after all other members have taken the floor.

Under the US-led proposal, when these administrative measures are applied to a member, the WTO Director-General will notify the relevant minister of that member.

Further, the proposal also provides for a financial penalty to be imposed on the member concerned, at a certain percentage of its normal assessed contribution to the WTO budget.

Challenging the naming and shaming measures and financial penalties, the proposal by the seven developing countries calls for an “inclusive approach” that would take into account:

(a)   the capacity constraints faced by developing countries;

(b)   the failure by developed countries to provide information in agriculture (members with final bound Aggregate Measurement of Support commitments);

(c)   the need for developed countries to comply with obligations under the WTO’s General Agreement on Trade in Services (GATS) to notify new or changes to existing laws, regulations or administrative guidelines which significantly affect trade in services, especially those concerning Mode 4;

(d)   notification of incentives provided by developed-country members to enterprises and institutions in least developed countries;

(e) the need to disclose the origin of biological resources and/or associated traditional knowledge in relevant patent applications;

(f) the need for transparency in tariffs by submitting the ad valorem equivalents of opaque tariffs on farm products; and

(g) the need for “transparent and inclusive” functioning of the WTO, particularly “how Ministerial Conferences are conducted, and the processes that precede them in Geneva – each WTO member must be provided an equal opportunity in the decision-making process. Thus, meetings must be open to all, not only to some in green room processes.”

“Core principles”

In addition, India floated a “concept paper” at a 19 June retreat of developing-country trade envoys hosted by China in which it proposed “strengthening the WTO to promote development and inclusivity” by preserving the “core principles of the Multilateral Trading System.”

India has demanded amendments to laws and regulations that mandate unilateral action such as Section 232 tariffs imposed by the US under security provisions.

India has said “the following rules in the Marrakesh Agreement are fundamental and must be respected:

l    Article II and Article III on the multilateral functions of the WTO;

l     Article IX on the continuation of the practice of decision-making by consensus;

l     Article X: when there are amendments (additions or changes) to WTO rules, there must be consensus, followed by ratification by members. New rules enter into force only when ratification numbers required have been attained.”

India also said “many members have evinced interest in pursuing outcomes in some areas through joint plurilateral initiatives (JPIs).” In light of this, it called for adhering to “provisions governing plurilateral agreements in the Marrakesh Agreement.”

(Article X.9 of the Marrakesh Agreement sets out conditions, procedures and decision-making for adding to the plurilateral agreements included in its Annex 4. It states: “The Ministerial Conference, upon the request of the Members parties to a trade agreement, may decide exclusively by consensus to add that agreement to Annex 4...”)

“If they are to be multilateral agreements,” said India in its concept paper, “the outcomes of these initiatives, by way of new rules, can only be introduced into the WTO when there is consensus, and Article X of the Marrakesh Agreement on amendments must govern any changes or additions to the WTO Agreement.”

In short, the JPIs must “not change the fundamental architecture of WTO”, India has demanded.

The 8 July meeting of the CTG and the WTO General Council meeting on 23 July will indicate whether the developing countries are able to thwart the one-sided agenda being pushed by the US and its allies, said trade envoys who asked not to be quoted. (SUNS8939)   

Third World Economics, Issue No. 683, 16-28 February 2019, pp6-7